GMT 683

7.2 Discussion Questions

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Post your answer to only one of the following questions. Begin your post with the question you are answering and then make your response.

Briefly describe at least one example of how a public or private enterprise can use the postponement of product differentiation to increase profits.
Select a company or industry and describe what metrics you would use to evaluate the effectiveness and efficiency of your transportation strategy? Briefly explain your choice of metrics.

Reply to at least two of your classmates on different topics than your original post. Their responses are below.



Briefly describe at least one example of how a public or private enterprise can use the postponement of product differentiation to increase profits.

Postponement is the capability of a supply chain to delay its product customization until closer to when a product is sold and demand is known/more certain. There are certain products in which customers like customization, however it’s costly for a company to provide a line of highly customized products when it is unknown if each of those customized products will sell well or not. It’s more cost effective if a company can produce a base model with modular design/common interface components that can be customized as close as possible to the actual customer order so that the demand for each customization is more certain.

Hewlett-Packard is one manufacturer that uses and profits from postponement of product differentiation. HP took a modular design in customizing its printers between the Asian and European markets. They manufactured base models and send those base models to local distribution centers where they could be customized according to each order. Each local distribution center could outfit the base printer with a country-specific external power supply/plugs. “The distribution center not only customizes the product but also purchases the materials that differentiate it (the power supplies, packaging, and manuals). As a result of this redesign, manufacturing costs are slightly higher than when the factories customized the printers, but the total manufacturing, shipping, and inventory costs dropped by 25%.” In this case, 90% of an HP printer sold in Germany is the same as one sold in Japan. The components that are different, such as plugs, manuals, etc, are delayed in “customizing” the base product until the base printer arrives in its intended location of sale.

Standardization is also a key design consideration with postponement, because if the base model components for printers marketed to two different regions are different they cannot be customized between regions or have delayed customization between regions. HP sells LaserJet printers in both Europe and North America. However, prior to implementing the postponed differentiation, each LaserJet printer was set to be fitted with either a dedicated power supply of 110 volts (used in America) or 220 volts (used in Europe). That would mean that the portion of the printers made with 110 volts could only be sold in America and the 220 volts could only be ever sold in Europe. If Europe had a sudden spike in printer demand, HP would not be able to back fill its European printer demand with printers configured with 110 volt power supply base model printers. With an improvement of design, a universal power supply is now built into their laserjet printers and HP can now ship printers between continents without the limitations of before. “As a result of standardizing the LaserJet, HP was able to reduce the total costs of manufacturing, stocking, and delivering the finished product to the customer by 5%per year.”



Chopra, S., & Meindl, P. (2013).Supply Chain Management: Strategy, Planning, and Operation (5th ed.). Upper Saddle River, New Jersey: Pearson Prentice Hall.


Select a company or industry and describe what metrics you would use to evaluate the effectiveness and efficiency of your transportation strategy? Briefly explain your choice of metrics.

More and more companies, believe that by using reports and metrics to consistently monitoring and evaluating various aspects of their supply chain, they are better ensuring their supply chain sustainability and profitability. Chopra and Meindl (2013), suggest that companies should use metrics, to evaluate their major logistical drivers, which include facilities, inventory, transportation, information, sourcing, and pricing (pg. 47). Within these categories, there are several industry defined standard metrics, which companies have at their disposal to help with evaluating the effectiveness and efficiency of their supply chain.

One company that has done a great job with managing and optimizing their supply chain efficiencies is Amazon. Two areas the company has excelled at, include their optimization of both their facilities and inventory. For evaluating the effectiveness and efficiency of Amazon’s facilities, I would use metrics to measure their capacity and utilization rates, their flow-time efficiencies, their processing setup/idle time, and their production service levels. These measurements would better enable me to identify the strengths and weaknesses of the company’s internal operations and highlight potential bottlenecks and process gaps. For evaluating the company’s inventory, some of the metrics I would use to evaluate the company, include their fill rate, average inventory, inventory turns, and fraction of out of time stock. Part of Amazon’s success with both their inventory and facilities, has come from their implementation of fulfillment centers. Wulfraat (2014), describes these fulfillment centers as “massive distribution centers that are loaded up with a massive variety of products, high-speed conveyor systems, and hundreds of people focused on moving product out the door as fast as humanly possible” (para. 10).


Chopra, S., & Meindl, P. (2013). Supply chain management: Strategy, planning, and operation (5th ed.). Boston: Pearson.

Wulfraat, M. (2013, July 23). Amazon is Building a New Distribution Network – Quickly and Quietly! Retrieved November 23, 2015, from http://www.scdigest.com/experts/Wulfraat_14-07-23.php?cid=8309 (Links to an external site.)




4) How can postponement of product differentiation be used to improve supply chain profitability?

7) When can tailored sourcing be used to improve supply chain profits? What are some challenges with implementing tailored souring?


3) Wal-Mart designs its networks so that DC supports several large retail stores. Explain how the company can use such a network to reduce transportation costs while replenishing inventories frequently.

4) Compare the transportation costs for an airline business such as Amazon and a retailer such as Home Depot when selling home-improvement materials.


Chapter 13: Determining the Optimum Level of Product Availability

Using the Sportmart Demo, the manager decided to conduct market research and, based on the additional information she obtained from the research, she believes that the standard deviation of demand can be reduced to 50 instead of 100. What is the impact of profitability? What happens to profitability if the standard deviation of demand increases to 150? What did you learn from this exercise?

Note: This is not a “Solver” problem. Just change the Standard Deviation directly in Excel from 100 to 50 and then 150 to see the impact on profitability.



Q-Sportmart_Demo.xls (45 KB)

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